Govt, RBI to take steps at right time to strengthen rupee: Rajan

Finance Ministry on Tuesday said it will take steps to increase foreign investment flows into the country to strengthen rupee and the regulators will act at appropriate time to contain the fall in domestic currency that touched a record low of Rs. 58.96 to a dollar. File photo

The Finance Ministry on Tuesday said it will take steps to increase foreign investment flows into the country to strengthen rupee and the regulators will act at appropriate time to contain the fall in domestic currency that touched a record low of Rs. 58.96 to a dollar.

“We will continue to implement measures to ensure that portfolio investor inflows are enabled and encouraged and some of these measures will be announced very shortly.

“In the coming weeks, we will recommend to the Cabinet policies to enhance FDI limits on number of areas all this will help not just in short-term objective of financing the CAD safely but also in the longer term objective of ensuring sustainable growth,” Chief Economic Advisor Raghuram Rajan told reporters in New Delhi.

The exchange rate has depreciated by 5.5 per cent cent since January 1 and over 2.5 per cent in last two trading session. The rupee is currently trading at around -- to a dollar.

“There has been some volatility in the financial markets in the last few days. The government, RBI and Sebi are watching the market development and each one will take action as warranted,” Mr. Rajan said.

He said the depreciation is rupee is mainly on account of outflow of FII funds from debt instruments and trade high trade deficit.

Since May 1, outflows from debt instruments stood at $486 million, at the same time equity inflows on net stood at $4.16 billion. So since May 1, the portfolio inflow into India has been $3.7 billion.

“Despite these reasons debt outflow and larger trade deficit in May -- things are turning around,” he said.